Performance Evaluations: Do They Do More Harm Than Good?

A young head of HR at a small firm I know just had his first experience with managing and implementing the employee performance evaluation process. He is a very smart guy and carefully implemented the process in a way that was consistent with "best practices" suggested by leading HR professionals. I guess things did not come out as well as he hoped. He wrote me yesterday: "I’m getting very close to finishing up our performance reviews for 07. I’m
having some questions as to how helpful the process is for companies. .... I am wondering if the process does more harm
than good."

I forwarded this email to My co-author Jeff Pfeffer and he reminded me that there is a lot of theory and evidence out there suggesting that many companies might be better off not doing performance evaluations at all, as this young head of HR seems to be learning. Although there is so much faith in the importance of doing performance evaluations, most companies implement them badly enough that (applying the "first do no harm" standard to management), and doing them well is expensive enough and time consuming enough, that having no process, or an extremely simple and quick one (e.g., one company I know used to have employees pick three peers or subordinates, and those three alone decided the size of the raise and bonus within a preset range).

Then there is another, more extreme argument, that the performance evaluation process is fundamentally flawed. That doing it well is like doing blood-letting well -- it is a bad practice that does more harm than good in all or nearly all cases. This is the position taken by the famous quality guru W. Edwards Deming -- he was vehemently opposed to using them at all. As Jeff Pfeffer and I wrote on page 193 of The Knowing-Doing Gap:Deming emphasized that forced rankings and other merit ratings that breed
internal competition are bad management because they undermine motivation and
breed contempt for management among people who, at least at first, were doing
good work. He argued that these systems require leaders to label many people as
poor performers even though their work is well within the range of high
quality. Deming maintained that when people get unfair negative evaluations, it
can leave them "bitter, crushed, bruised, battered, desolate, despondent,
dejected, feeling inferior, some even depressed, unfit for work for weeks after
receipt of the rating, unable to comprehend why they are inferior."

I would be curious to hear from people out there who have a lot of experience giving or getting performance evaluations. Do they do so much damage that the best performance evaluation might be none at all?

To make an extreme and probably over cynical argument: Do organization just do them because they have always done them, because there is excessive and irrational faith in them, and perhaps because a whole bunch of vendors, consultants, and HR professionals benefit financially (in fact, you could argue that because so many things go wrong with evaluations, that the amount of work they generate is nearly endless).

Performance Appraisals ignite mixed emotions. It's amazing that such dinosaurs (performance review systems, not the people) are still around. They must be, however, since a book has been published called “Get Rid of Performance Reviews’. Yet despite the outcry against reviews, there's nothing wrong with them that can't be fixed by getting managers off of center stage. Top management can fix the basic problems the review system faces.
Critics argue that performance reviews not only don't accomplish what they're supposed to do - that is, improve performance, enhance employee skills and achieve planned outcomes - they have unintended negative consequences. In many cases, unfortunately, that's true. But it doesn't have to be that way. What companies need to abolish is not performance review itself, but the idea that it's a “management tool. Here are some practiced paradigms that must be discarded:
Performance Review is designed, as the name suggests, in support of managers. If you believe this, your management is one of the roadblocks to exceptional performance. The most useful performance review support work relationships between employees (managers too are employees). Both parties need to address the question of how to best serve the goals and outcomes and align their work efforts.
Performance review is a management tool. Managers are not necessarily the best qualified to assess their staff’s accomplishments. In fact, they may have a very limited or biased view. A more complete and accurate picture results when employees and managers seek feedback from a variety of customers, team leaders, professional peers, and others inside or from outside the unit.
Performance reviews include judgments from a “higher authority”. Judgments produce compliant workers – people who are told what to do – not innovative ones. People hate performance reviews because most of them are fault-finding. How much better to ask, “What did we learn from this? What can we each do different the next time?”
The manager is responsible for obtaining input from the employees. 21st century employees can’t assume a passive role in performance review, providing “tough-minded” self-assessments and valuable insights only on request. They must take the initiative, soliciting feedback from their managers and others. No risk taking to solicit the complete picture and no learning means no improvements.
Managers should be trained in performance reviews, then prepare their employees for the process. If performance review is to be a productive partnership with employees taking the active role and both parties committed to exchanging knowledge and ideas, managers and employee need to be trained together.

I'm surprised there has been no mention of Kohn's "Punished by Rewards" in this thread. He picked up where Deming left off and this book includes a number of arguments against performance pay, and cites a fair amount of research.

As a subordinate and junior leader, I have received and given many performance evaluations.

My position is that performance evaluations are a needed and invaluable device.

Performance evaluations are an excellent way for a leader/manager to give feedback to the subordinate. In absence of performance evaluations, how will an employee learn if he/she is meeting or exceeding determined standards for his/her tasks?

The process to produce a performance evaluation should be a collaborative effort undertaken by the leader and subordinate. For example, when an employee makes a meaningful contribution to the organization, he/she and his manager should attempt to annotate that instance.

A performance evaluation is beneficial if it is candid, identifies the subordinate's strengths and weaknesses, provides a plan of attack to minimize his/her weaknesses and maximize his/her strengths and allows the subordinate to concur or disagree with the evaluation.

Lastly, performance evaluations can be used as a basis for any administrative actions (e.g., promotion, demotion, reprimands or termination), which can protect both the leader and the subordinate.

I'll also pull some thoughts from a comment I left on your site last year: PE's perpetuate an environment of self aggrandizement that ruins teamwork. It seems rooted in a "survival of the fittest" core belief. I know referencing Darwin in management circles, or in any social context is fraught with pitfalls, but this misunderstanding of his work is so strong and so often mis-used it's difficult to avoid. Interesting when you consider that Darwin's work was really about "survival of the fitting-est" toward optimal resource utilization - which sounds more like teamwork in a social setting. I suspect that there are also even deeper misunderstandings of our various religious doctrines that worm their way into our corporate policies. A never ending drive to separate people into good and bad, so we can reward and punish appropriately, invariably ends up rewarding the bad sub-optimizing behaviors of personal promotion. If this is true, and I really hope I'm wrong, it's going to be long road to better workplaces. Thanks for your work in helping to pave the way.

It never ceases to amaze me how much time, focus and resources companies spend on trying to identify the "dead wood" and the "heros" in their companies. Entire HR departments, training sessions for managers and much strategic planning by Sr. Mgmt. teams revolve around some form of this activity. Yet there's little if any evidence that any good comes of it. Companies rid themselves of poor performers and reward their top performers with little impact on their overall effectiveness as an organization. It's not that there aren't poor employees or great employees, it's just that they matter less than whether a company is engaging all of those employees within capable systems. It seems all the time spent weeding out the bad and rewarding the good is always time taken away from improving the whole. It creates an environment of blame and self promotion - exactly the opposite of what is needed to pull people within a system into the work of optimizing it.
So refreshing to see this blog and these posts. Thank you.

I can meet all my performance measures and still not have been effective. (Among other things, I may have cheated or been lucky.) Conversely, I may have made wise choices, worked hard and still miss my numbers. If all we look at are numbers, we are in big trouble.

We need to get away from "measuring performance" and move toward "judging effectiveness".

Judging effectiveness is an essential part of managerial leadership. It's when we try to attach numbers and measures in an well-intentioned but misguided attempt to make things "objective" that we run into a mess. We cannot calculate effectiveness is must be a judgment call. That is part of what managers are paid to do.

The real problem with appraisals lies within the appraiser, not in the process itself.

Subordinates need 360 degree feedback constantly and they need to buy into an appraisal system that they feel is legitimate and realistic. Because so many times, Reviewing Managers either lack the knowledge of conducting reviews or they have their own agenda at work in the process, the process itself becomes a waste of time and effort.

Only when appraisers know how to utilize this important tool and subordinates agree that it is a worthwhile exercise will the problems associated with appraisals be resolved. If not, you will continue to see negative comments from both reviewers as well as reviewees.

It is similar to parenting - you don't automatically become a great parent just because you have kids. You must learn what it means to be the best parent you can be and this can only come from being taught how to do it correctly. Then you are left with using the process to utilize the best practices of what you have learned and pass on the good points to someone else who needs to learn how to do the process correctly - hence the reason why some are writing books on performing reviews correctly.

As I agree with previous comments about Performance Appraisals in current form being not just a waste of time but also demotivating and damaging, I will not comment on them. Instead, I will speculate on why they are done at all.

When one starts school, testing and grading starts. Somehow it is assumed that learning and progress must be assessed by 'experts' who will not only rank you but also determine the corrective action. This somehow continues to carry over into universities, with ever more elaborate assessment processes and then into the workplace.

So, I wonder how many readers, academic or practitioners have actually tried not to grade or mark students or workers but asked them to do own assessment? I did it a few years ago when teaching as Visiting Lecturer an Advanced Leadership Course at MBA Program in Graduate School of Business, University of Cape Town. It was fascinating to observe how people who were never put in this situation before first did not know how to go about it and then started to take responsibility for their own learning. Most importantly, each and every one of the participants has blossomed in some way. I did not have anyone who failed to submit required work, though I was only providing feedback for it as they were marking themselves.

The formula was simple. Everyone started with 100% and could only lose points by not doing or failing to accomplish something. When their marks came to me, there were less than 10% of those I felt I need to go back to a query their assessment - which had to be justified. And of these queries, half were because I felt they marked themselves too harsh in comparison to all others!

Incidentally, I have made more long term friends after 6 weeks of this course than on those which lasted a year before. And, some of the students have really spread their wings around the world gaining in confidence while retaining sense of reality.

Incidentally, I subsequently found a similar scheme described by Ben Zander for his program at Boston Music Academy in the book The Art of Possible - I recommend it especially for Rule no.5!

I agree 100%. performance reviews are the worst thing invented. I know this from personal experience. I am an HR Assistant that supports 6 recruiters, a manager, and an ex director. This past September I had my review and although, I do my job and never had a compliant about my work from anyone in the group I still received some negative feedback.

Because my work style and my organizational skills did not match how my boss "would do thing" she said I could follow directions better. She also stated that I lacked Initiative and motivation b/c I didn't ask for additional work. Everyone knows, that an assistant who supports 8 people gets all the grunt work from everyone in the group.

I suspect that she put it on there so she did not have to worry about moving me up any time soon. I had applied for a different job in the group and was denied. I think reviews are a way for employers to keep good employees from moving up if there are not spots or they don't want to lose that person from the position they are in.

I do not agree with them. I was left upset and disappointed b/c I know I do a good job everyday. I have now dedicated my time to tasks I only need to do and the rest of the time to do personal stuff. Screw the Man.

The only solutions I agree with in the above comments are 1) training the reviewers for greater consistency throughout the organization, and 2) developing more realistic goals based on company-wide goals, department-wide goals and individual goals.

Currently, what I see is a lack of knowledge in the review/appraisal process from reviewing managers who don't know how to review subordinates as well as companies (from the highest level) who don't understand how to incorporate a review/appraisal process that truly aligns itself with the philosophy and culture of the organization itself (whether it be the Board of Directors or the Founder and CEO).

Most companies go through the motion in the review process with HR requiring some kind of documented appraisal for the employee's personnel file and Finance holding the merit budget to a certain percentage. What you have left is a potentially flawed process that meets the goals of a limited few which can have the unintended effect of demoralizing many in the company.

There are no easy answers for solving these problems, for as many problems that exist on the employer side, there are a large number of problems that exist on the employee side as well (i.e., employees who waste time and effort by not doing what they are supposed to do, lack of goals, expectations, etc). If they were appraised honestly, then some of them would be placed on PIP's (Performance Improvement Plans) or they would be gone in 30 days. Constant feedback to subordinates, more team-oriented reward systems and more realistic goal setting appraoches are the only means that I see for improving the review/appraisal process. In its current state, there are a lot more negatives than positives.

It's important to make a distinction between performance evaluation and the performance evaluation system.

Performance evaluation is part of every boss's job and it should be happening several times every day. It involves taking every contact with a team member as an opportunity to coach, counsel, encourage and correct. Most of these evaluations are short and informal.

The performance evaluation system is something quite different. In most companies it is always formal, forma-based, and infrequent. Perhaps worst, it encourages managers to think that they're actually doing performance evaluation when they fill out that form that looks distressingly like a third grade report card. It invites management by "gotcha" and sows the seeds for lawsuits.

My solution: Scrap the system that we now have. Instead make routine performance evaluation part of every boss's job. Teach them how to do it. Teach them when and how to move from informal to formal. Encourage them to have planning and review sessions with every team member every quarter or so.

My personal experience of being the recipient of many performance appraisals is that they are generally based on poorly articulated goals & objectives in the first place. Then little corrective action regarding this is applied during the year. This leads to an ambiguous discussion at year end where it usually boils down to subjective feelings on the part of your boss anyway. The result is probably equally unsatisfactory for both manager & employee. I know this process rarely motivates me to perform better.

I find an ongoing open relationship that includes well formed goals and consistent feedback/communication is a better motivator & generates a better performance.

Also I must confess to suspicion of forced rankings and a belief that better articulation of objectives, outputs and their measurement will make both good & bad performance more obvious.

A reader from a local tech company sent me a fantastic note about his experience with performance reviews. I like it because it is so wise and balanced. I reprint it below with the company name and his name removed:

I'm a bit shy so far about responding to comments on a blog (given the academic nature of your readers), but I have a great deal of experience with annual performance reviews. I'm a Director of Technical Support and go through this process annually (of course).

I've seen the annual review used in very effective ways and I've seen it be a disaster. The only way that an annual review can be positive is if the management team uses it as only a small part of an ongoing coaching and development program. If an employee gets very regular feedback throughout the year, the annual review is only that, a review of the conversations that they've had. If there are any surprises in the review, the manager failed.
To take this a step further, this must be done as a management team in a consistent way. Employees often transfer from one manager to another. If the consistent process is not in place surprises will occur at the end of the year. When I deliver annual reviews, my final question is "are there any surprises?". This is crucial.

Regarding the stack ranking comments, I agree and disagree with Dr. Demming.
Stack ranking can be damaging if there are no exceptions to the statistical distribution. But, I have never seen an organization yet that did not somewhat fall into a normal distribution. One year I did feel so strongly about the positive performance of an organization that I went to bat for them with HR and the executive staff. The positive performance was widely recognized outside of the group and we agreed that there were more exceptional people in that group than is normal.

On the flip side of the positive rankings, I am currently leading an organization that I am tasked to "fix". I've told my management team that, given the poor performance of the organization (which they didn't recognize prior to my arrival) why should we fit a normal distribution. We worked together to rank individuals in a way that matched the organizational performance.

Does this make sense to you? Do you have any insights that might help me evolve in my thought process?

BTW, I love your blog and have really learned a lot from your books. "The No Asshole Rule" is a gem, and your previous books that you wrote with Dr.
Pfeffer are outstanding. Thank you for changing the way I think.

I am a not-so-young HR professional in a smallish company that Bob knows well. I have designed and implemented corporate performance management systems in nearly a dozen Fortune 500 companies using the best practice method (sorry!), Here are some of my thoughts on this issue. (okay, I'm a slow learner)

1.) People are not machines so why do we give them 10,000 mile check-ups?

2.) Performance matters, so when something is not working it is a business imperative to discuss it, learn what's going on and correct it.

3.) People don't live and work on a quarterly or annual calendar so why discuss performance that way?

4.) If you were a living, breathing, human (and you are) what would you want from your organization?

Bottom line: abolish performance reviews they take too much time and have such spotty effectiveness that their cost far outweighs their return (more harm than good).

Instead: find out what the people in your organization need in order to do their best work. Very few will say "annual performance review". Then design something that actually gives them and your business what you need to be successful.

Just before the end of a temporary contract I completed a series of "review conversations" with employees for whom I had direct responsiblity. I was not in a position to review their performance as I was only with them for a short while. I neither could nor wanted to help them set "goals". The initial reaction to the setting of times for the conversations was overwhelmingly one of dread. This is not unique to that organisation. So if the starting point is usually negative then that must be harmful surely. On the other hand having a regular "touch base" open and enquiring conversation could be beneficial.
Having sat on teams where decisions were made about who would be paid what as a result of a variety of performance measures - influenced hugely by the person undertaking the review - I have a problem with linking performance appraisal outcomes/scores directly to pay.

Are they harmful? Let's look at it this way - my last appraisal has motivated me to implement a new project - GTFO, or "Get The F*** Out" out of the company. The overall experience was amazingly demotivating - it even included the appraiser giving me some tips about which companies I should talk to about a new job.